A massive expansion of controversial shale gas exploration – known as fracking – will be triggered by George Osborne when he unveils lucrative tax breaks this week.

While the Chancellor’s announcement in Wednesday’s Autumn Statement will be welcomed by the energy industry, it will alarm environmentalists.

They fear that the technique, which involves creating explosions deep underground to release gas, has the potential to contaminate ground water and they point out that it has already caused earthquakes.

In October, Osborne made it clear that he wanted to offer the fledgling shale gas industry a ‘generous new tax regime’ to encourage fracking exploration. This week he will make good his promise.

He will confirm in his statement that Britain is sitting on shale gas reserves worth £1.5trillion that could yield the country huge economic benefits.

The British Geological Survey, which has been commissioned by the Department of Energy to find out the extent of British reserves, has identified vast deposits of shale gas in the North West, North Wales, the Isle of Man, South Cumbria, East Midlands and the North East.

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The huge extent of the gas fields is much bigger than previously thought and if exploited would potentially bring energy price stability and independence from imports for decades.

Even though only about ten per cent of the gas is in unpopulated areas suitable for extraction, it would still be worth £150billion.

The Chancellor is desperate to boost domestic gas exploration as a way of reducing Britain’s dependence on foreign gas supplies.

The sharp decline in North Sea gas finds makes Britain more reliant on energy supplies from Qatar, Russia and the US.

Osborne plans to exclude fracking from the current oil and tax regime. Instead it will benefit from targeted tax breaks aimed at encouraging investment.

To further emphasise the importance of gas to the economy, the Chancellor has instructed the Department of Energy to publish its long-awaited Gas Strategy document on the same day as the Autumn Statement.

This will show how crucially important gas is to energy security in Britain.

Not only is gas ‘clean’ compared with coal and oil, it is also relatively cheap to build gas plants.

At least 22 gas-fired plants are required to be built to help plug the energy gap over the next ten years as old coal and nuclear power stations are closed down.

Gas-fired plants will be used only intermittently – in winter when demand is highest and when there is no wind to blow turbines – so they are uneconomic. Therefore power companies will need encouragement to start building them.

The Gas Strategy document will outline how the Government aims to subsidise the work.